Dollar edges back from 18-month high after FOMC minutes

The dollar showed resilience, hovering close to its strongest level in 18 months, as markets digested hawkish minutes from the Federal Open Market Committee (FOMC). These minutes suggested US policymakers view inflation as the primary risk to their outlook. The dollar index remained steady at 102.23 after gaining 0.3% on Wednesday.

Following the "Liberation Day" tariff announcement the week prior, the greenback was within a few pips of its strongest level since April 9, 2025. Federal Reserve officials unanimously raised interest rates by 0.25% at the September 15-16 meeting, but the FOMC's minutes, released on Wednesday, revealed ongoing disagreements about their motivations.

The minutes underscored the hawkish sentiment that accompanied the Fed's September rate hike, with most participants still favoring additional tightening and nearly all anticipating upward pressure on inflation at the time of the meeting, as noted by Westpac analysts. However, the minutes did not significantly alter expectations that the Fed will refrain from further rate hikes at its upcoming meeting, with Fed funds futures indicating a 19% probability of a 25-basis-point increase at their next two-day meeting on October 28, unchanged from the previous day.

Against the Japanese yen, the US dollar declined 0.2% to 157.815 yen, following Japan's August current account surplus of 4.062 trillion yen ($25.7 billion), surpassing economists' median forecast of 3.19 trillion yen. The Australian dollar and the New Zealand dollar were both flat at $0.6960 and $0.5600, respectively. The US dollar remained unchanged at 6.7015 against the Chinese yuan in offshore trading.

Meanwhile, the euro and British pound remained unchanged at $1.1201 and $1.3215, respectively. Bitcoin experienced a 0.2% drop to $83,233.40, while ether decreased marginally by 0.1% to $2,571.07.